With
all employees out of work and the club’s future hanging by a thread,
administrators are set to pore over the club’s finances. What will they
find? There is a lot to unravel…
Another
wall in the edifice of the Worcester Warriors has crumbled. The company
responsible for paying the squad, WRFC Players Ltd, has been wound up.
All employees are now officially out of work, while administrators,
governing bodies and potential buyers pore over the state of the club’s
main operating company, WRFC Trading Ltd, which has been placed into
administration, and the constellation of companies that surround it.
What
will the administrators find? There is a lot to unravel. Over the past
18 months, the Guardian has looked into the club’s management and
financial arrangements since it was bought from the Allen family by
a consortium in September 2018. The tale that emerges around the
erection of a bewildering network of companies and microcompanies helps
to illustrate the mess the club finds itself in.
‘Like the Titanic’: Diamond dismayed as ruling terminates Worcester contractsRead moreOn
28 September 2018, a consortium led by Jed McCrory, a former director
of Swindon Town and various other minor-league football clubs, agreed
terms with the previous owners, when his company Militibus Quanco paid
£1 for a majority shareholding in WRFC Trading. The club’s long-standing
operating company came with Sixways Stadium and the 50 acres of land
within which it sits, advertised for sale by Livingstone Partners at
£28m less than a year earlier.
On
the same day, another of McCrory’s companies, MQ Property, paid £6.25m
for the freehold of the stadium and land. Immediately, a 999-year lease
for the assets was sold to what MQ Property’s first set of accounts
would later describe as a “connected party”, Link Corporate Trustees,
acting on behalf of Alpha Real Capital. That company, again on the same
day, extended a 175-year lease back to WRFC Trading.
On
the face of it, those transactions amount to a sale and leaseback of
the stadium and land, but its triangular nature appears unusual. No one
was willing to explain to the Guardian how and why the structures had
been set up in this way. The documents appear to suggest that MQ
Property raised finance against Sixways from a connected party in order
to buy the asset from WRFC Trading. When a long leasehold was returned
to it, WRFC Trading bore the responsibility of the future payments.
In
the relevant accounts later published, that 175-year lease was valued
as an asset of £16.5m for WRFC Trading, while the freehold, which
remained with MQ Property, was valued at nil, because of the retention
of the 999-year leasehold by Link Corporate Trustees. WRFC Trading’s
minimum future lease payments were registered as £6.25m. The value of
the asset at this point therefore sat in WRFC Trading, not in MQ
Property.
Worcester Warriors fans wave flags outside of Sixways Stadium. Photograph: David Davies/PAMcCrory’s
consortium consisted of: Scott Priestnall, a businessman whose father,
Martin, was once a director of Luton Town; Errol Pope, a trader
presented as the financial backer; and Dave Seymour, former flanker for
Sale and Saracens. Only McCrory was to assume position as a director of
the club and its new group of companies, according to documents at
Companies House.
Within
weeks of the takeover, McCrory advised the club’s board of his
intention to leave for personal reasons, but he said he had found two
candidates to take over, Jason Whittingham and Colin Goldring, who had
become owners a few months earlier of Morecambe FC.
Having taken up positions as directors of Worcester
on 17 October 2018 Whittingham and Goldring assumed control on 11 June
2019, when McCrory departed all directorships. And yet a closer look at
the dates appears to raise questions over the relationships between the
company directors. Bond Group Sixways, which became the parent company
at the top of the entire group as McCrory departed, thus owning WRFC
Trading, was incorporated with Whittingham as its sole director on 22
June 2018, a full three months before McCrory’s consortium had bought
the club. No one has been willing or able to explain to the Guardian how
this came to be. It seems the plan may have been for Whittingham, at
least, to take over.
At this point, according
to documents at Companies House, Whittingham has significant control of
Bond Group Sixways, which owns Militibus Quanco. Goldring’s
status is unclear. There is nothing in the relevant documents of the
parent company, or any of the others, to suggest he owns anything, but
he is widely referred to as the owner of Worcester Warriors,
nonetheless, and describes himself thus on correspondence.
Militibus
Quanco (subsequently renamed Worcester Sport in August 2020) owns WRFC
Trading, which creaks under tens of millions of pounds’ worth of debt
and has cumulative losses of £60m since its incorporation. But at least
the latter owns a 175-year leasehold for the Sixways site, valued at
£16.5m, paying instalments for the leasehold to a company outside the
group.
Finance has been raised through a charge
on all the companies in the chain. Among the companies sits MQ
Property, which, according to its accounts, owns nothing but the
freehold for Sixways – and that has been valued at nil.
Then along came Covid and the accompanying financial pressure.
The
government announced help for community sports clubs to survive
lockdown in the shape of the Sport Winter Survival Package. One of the
conditions of each loan was that the government, through its agent Sport
England, took out primary charges on each club’s assets, in order to
protect the public money. Essentially, any debt or finance levied
against any asset had to be cleared before a club could receive its
funds.
A sign outside Sixways pleads: ‘Save Our Club’. Photograph: Zac Goodwin/PAIn
order to qualify for its loan, WRFC Trading used that loan to clear any
debt against its assets. Or in the case of the Sixways site, to bring
the asset back under its outright ownership.
On
17 February 2021, WRFC Trading collected its £15.3m loan by using £4.4m
of the public money to release charges that had been raised against
Worcester’s P-shares, their shareholding in Premier Rugby. And it used
another £4.83m of the loan to buy back the 999-year leasehold of the
stadium and land. On the face of it, this was a discount of nearly £1.5m
from the £6.25m the connected party had paid for it two and a half
years earlier. Sport England told the Guardian in May
2021 that this was due to the level of repayments WRFC Trading had been
obliged to make for the leasehold in the first few months of the
175-year term, which is corroborated by WRFC Trading’s accounts for the
period ending June 2020.
That
punitive repayment schedule ended with the repurchase of the 999-year
lease. Thus it appears nearly £10m of public money had been spent
replacing pre-existing debt with favourable finance. But at least WRFC
Trading now owned its stadium and land again.
Sport England responded by placing charges on the same day on all of WRFC Trading’s assets, on behalf of the government. The
Guardian understands that Sport England believed the 999-year lease, or
virtual freehold, had been merged into the 175-year leasehold and now
sat in WRFC Trading as collateral against the £15.3m loan. Sport England
said the government was the first creditor.
It
soon emerged that the picture was even more complicated. On 18 December
2021, MQ Property filed its first set of accounts, for the period
ending July 2019. In the post-balance-sheet events, the end of the sale
and leaseback of the stadium on 17 February 2021 is referred to, such
that Sixways Stadium and surrounding land were “brought back under
Company ownership”, ie the ownership of MQ Property, not under WRFC
Trading, where all the debt was sitting – and still sits.
It
appears the leases, rather than being merged to create a virtual
freehold, were actually surrendered. MQ Property’s accounts refer to the
transaction as a “settlement”. And so, as corroborated by
correspondence seen by the Guardian, ownership of the stadium and land
reverted to MQ Property, where the freehold had sat all the while since
September 2018, valued initially at nil.
This
is the alleged asset strip referred to in the letter sent in September
2022 by a major creditor to Sport England. How this happened with Sport
England’s charge in place over WRFC Trading and its assets is not clear.
Citing reasons of confidentiality, Sport England has not responded to
the Guardian’s latest questions. Whittingham subsequently told the Daily
Mail that same month that the details of the transaction were “far less
sinister and interesting” than they appeared, while Goldring had told
staff in a leaked letter in August that allegations of asset-stripping
were “completely false”.
The administrators
will be scrutinising this movement of assets between the various
companies. Asset stripping is not illegal in itself, particularly if
assets are moved out of a company to safeguard against its future
insolvency before the company is in any difficulty. The broader question
is whether public money should be used to facilitate it, particularly
when the fate of a major community rugby club and its employees is at
stake.
Worcester Warriors players talk to supporters after the final whistle of their game against Newcastle. Photograph: Zac Goodwin/PAOn
21 December 2021, three days after MQ Property filed their first set of
accounts, Sport England placed a new charge, through Worcester Sport,
over the equity of MQ Property but, crucially, not over its assets. On
30 June this year, MQ Property sold the six-acre site of the club’s £1m
training pitches for £350,000.
A
few days later, it was reported that, following a tribunal in April,
Goldring had been barred by the Solicitors Regulation Authority from
working for any law firm without clearance. Between
approximately June 2016 and April 2017, during a stint as a “trainee
solicitor” at a now-defunct Manchester law firm, he “caused or allowed”
the disappearance of €8.3m of a Saudi client’s money, raising questions
from some observers over the fate of a major community rugby club
remaining under his influence.
On 4 August,
Sport England took out a new charge on Sixways, but this time the
stadium on its own, now sitting alone in a new company of the same name.
At this point, Sport England knew WRFC Trading was facing a winding-up
petition. In an extension letter on the same date, this one also signed
by DCMS, reference is made to a petition brought on 29 July by ICM
Stellar Sports, one of the biggest sports agencies in the world. In
another letter deed, signed on the same day by all of the above, the
stadium was valued at £14.65m, having been transferred to its new
company from the previous owner, MQ Property, for no value.
Under
the terms of a fresh 999-year lease, again dated 4 August, with Sixways
Stadium Ltd, its new landlord, WRFC Trading’s use of its former asset
is restricted to the playing of, and training for, rugby. All
hospitality, sponsorship, pouring rights and marketing proceeds are to
be retained by the new company. After five years, WRFC Trading, if still
extant, will have to pay rent at market rate for use of the stadium.
Access to the stadium is restricted to a path marked on a map in the
lease documents.
Also in August, the news broke
that HRMC had filed more winding-up petitions, against WRFC Trading and
WRFC Players, for unpaid taxes. Now the club’s plight was common
knowledge. Potential purchasers, including one brought by former chief
executive, Jim O’Toole, insisted on administration as a condition of
purchase, so that recent dealings could be investigated. Whittingham
argued in an interview with the BBC that administration would bring
about the end of the club.
As
the club’s accounts were frozen, the owners raised the majority of the
August payroll through a £600,000 three-month loan at 20% interest from a
petrol-station company, charged over the stadium car park. On 1
September, in an email seen by the Guardian, the creditor who wrote to
Sport England offered to replace that with a £780,000 loan, which would
have covered the entirety of the payroll. If a suitable buyer could be
found, who would keep rugby at Sixways, he pledged to release the charge
to them for nil gain – an interest-free loan in other words, on the
condition that rugby remained at Sixways. Whittingham and Goldring chose
to stick with the original.
The rest of
September played out to various unfulfilled claims by the owners of an
imminent sale and the building clamour for the club to be put into
administration, including in the House of Commons. It was not until 26
September, when the RFU suspended Worcester from all competitions after
its latest deadline for assurances about the future of the club had been
missed, that Whittingham and Goldring accepted administration as an
inevitability.
And so the investigators were called in. Let the inquest be deep and wide-reaching.
